How to Use Them and What Types Are Available


Merchant cash advances, or MCAs, are a transaction-based form of financing in which a company purchases a share of another company’s future credit and debit card sales. The company that receives the advance hands over a certain percentage of each transaction as payment instead of the traditional monthly repayment terms that come with other types of lending.

Cash advances use factor rates instead of traditional interest to make money. These rates are typically expressed as a number between 1 and 2. Multiply the size of the advance by the factor rate, and the product is the total repayment amount. For example, if you take out an MCA for $17,000 at a factor rate of 1.15, you’ll repay 17000 x 1.15, or $19,550.

Because the total repayment amount is fixed from the beginning, MCAs sometimes carry an effective APR in the triple digits. Rest assured, they’re one of the most expensive forms of business financing. However, because they’re based on your annual revenue instead of your credit report, MCAs are often available to companies that more traditional bank loans are not available to.

If your trucking company processes many card-based transactions, has a low credit score, or needs money very quickly, an MCA can be a great option.

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